201 8 ANNUAL REPORT 2018 ANNUAL REPORT

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1 2018 ANNUAL REPORT

2 WHY WE ARE WHO WE ARE A culture of doing the right things and 11% YEAR-OVER-YEAR NET SALES GROWTH #1 MARKET SHARE DOG SNACKS #1 MARKET SHARE PEANUT BUTTER 33% YEAR-OVER-YEAR NET SALES GROWTH 11% YEAR-OVER-YEAR NET SALES GROWTH doing things right Of dotting the i s and crossing the t s A culture of growth individual and as a company. A result of living our Basic Beliefs Our Commitment to Each Other, to our consumers, and to our customers. As we look to the future of unlimited possibilities, we recognize the principles that are instrumental to our success: A culture deeply rooted in our Basic Beliefs, guideposts for decisions at every level; A culture that encourages commitment to each other, clear communication and collaboration; A culture of appreciation; A family-sense of sharing in a job well done; Where every person makes a difference. Strong Portfolio of Brands Our portfolio is well-positioned in great categories and is balanced with iconic, market-leading brands and emerging, on-trend brands to meet shifting consumer needs in an increasingly dynamic retail marketplace. #1 MARKET SHARE FRUIT SPREADS 15% YEAR-OVER-YEAR NET SALES GROWTH #1 MARKET SHARE AT-HOME COFFEE 2018 ANNUAL REPORT 1

3 A Commitment to Growth in the Pet Category As the largest center-of-store grocery category, pet food and snacks is a $32 billion industry in the U.S. and growing. With our recent acquisition of Ainsworth Pet Nutrition LLC, we are increasing our presence in the premium segment and bolstering our total pet portfolio. A Strategy Focused on Our Consumers We have a deep understanding of consumer needs, a pulse on emerging trends, and an obsession with delighting our consumers. In a digitally powered, omnichannel world, this means delivering meaningful products and experiences, inspired design, and relevant communication at every touchpoint. This consumer centricity powers the growth of our portfolio of iconic brands and high-growth emerging brands, and guides innovation and acquisition of new brands. 2 THE J. M. SMUCKER COMPANY 2018 ANNUAL REPORT 3

4 Dear Shareholders and Friends, Since our founding more than 120 years ago, The J.M. Smucker Company has been helping bring families together to share memorable meals and moments. Guided by Our Vision to engage, delight, and inspire consumers through trusted food and beverage brands that bring joy throughout their lives, Smucker has continued to grow with a balanced portfolio of leading and emerging on-trend brands. As the food industry continues to face unprecedented change, Smucker is evolving to meet shifting consumer preferences and behaviors. This past year experienced pricing pressure from retailers, strong competition from private-label and niche brands, a continued shift toward e-commerce purchases, and input cost inflation. However, our ability to adapt has long been a hallmark of our Company, and we remain confident the actions we are taking to align our portfolio for growth are positioning us to deliver long-term shareholder value. STRATEGIC ROADMAP We believe the key to outperforming the industry in challenging times is remaining focused on a strategic roadmap with clear plans outlined and a strong team in place to execute. We are encouraged by the progress being made against the four pillars of our strategic roadmap innovation, investments, cost savings, and acquisitions all of which continue to position us to deliver on our three key financial priorities of driving topline growth, achieving significant cost savings, and delivering earnings per share growth. FINANCIAL HIGHLIGHTS YEAR ENDED APRIL 30, (DOLLARS AND SHARES IN MILLIONS, EXCEPT PER SHARE DATA) Net sales $ 7,357.1 $7,392.3 NET INCOME AND NET INCOME PER COMMON SHARE Net income $1,338.6 $ Net income per common share assuming dilution $ $ 5.10 ADJUSTED INCOME AND EARNINGS PER SHARE (A) Adjusted income $ $ Adjusted earnings per share assuming dilution $ 7.96 $ 7.72 COMMON SHARES OUTSTANDING AT YEAR END NUMBER OF EMPLOYEES 7,000 7,140 (A) We use non-gaap financial measures to evaluate our performance. Refer to Non-GAAP Financial Measures in the Management s Discussion and Analysis section for a reconciliation to the comparable GAAP financial measure. The values of today s consumers underpin our strategy. Sharpening our focus on innovative product platforms to deliver more of what consumers want is a priority, along with continuing to build e-commerce capabilities. Finally, we are strategically acquiring and divesting brands to increase our participation in categories with the most growth potential. This commitment to our strategic roadmap is yielding results. Highlights include: An increase in diluted earnings per share to $11.78, which included a substantial nonrecurring benefit from U.S. income tax reform. Adjusted earnings per share was $7.96; Free cash flow of $896 million; an increase of $30 million; Delivery of nearly $500 million, or 7 percent of fiscal year 2018 net sales, from sales of new products introduced in the past three years; On-trend brand growth with Smucker s Uncrustables, Nature s Recipe, Dunkin Donuts and Café Bustelo as each experienced double-digit sales growth; Net sales growth for key leading brands such as Smucker s, Jif, and Milk-Bone ; Achieved a targeted $140 million in incremental synergies and cost savings for the fiscal year; and A return of more than $350 million to our shareholders in the form of dividends, while reducing total debt by nearly $570 million. STRENGTH OF LEADING BRANDS AND SEGMENTS Our brands can be found in 92 percent of U.S. households, and we hold market leadership positions through Smucker s fruit spreads, Jif peanut butter, Folgers coffee, and Milk-Bone dog snacks. Our leading brands are critical to fueling future growth and investments for the Company, and we know that driving growth from these well-established brands generates strong returns. Beyond individual brands, a significant element of our strategy centers on strengthening the Company s portfolio with a particular focus on the coffee, pet, and snacking categories. 4 THE J. M. SMUCKER COMPANY 2018 ANNUAL REPORT 5

5 Coffee remains a highly attractive category with retail sales for the overall at-home coffee market growing at a 3 percent compound annual growth rate during the past five years, primarily driven by the premium and one-cup segments. Our Folgers, Dunkin Donuts and Café Bustelo brands hold a market-leading 26 percent share of the category. Still, we have a significant opportunity to expand that leadership, as only 38 percent of our coffee sales are in the premium and one-cup segments that account for 66 percent of category sales. We are shifting the balance of our portfolio toward these areas. For our U.S. Consumer Foods business, a key area of focus is growing our snack portfolio. Our Smucker s Uncrustables, Jif, and Sahale Snacks brands will play a key role in this evolution, as we expect to double the size of the Company s $330 million snacking portfolio during the next five years. As we expand into fast-growing categories, we have also demonstrated throughout our history a willingness to divest businesses that are no longer consistent with our strategic direction. This has driven our decision to divest the U.S. baking business, including the Pillsbury, Martha White, Hungry Jack, White Lily, and Jim Dandy brands. In Canada, we will continue to participate in the baking category as it remains a key part of our portfolio in that market. INNOVATING TO ALIGN WITH CONSUMER TRENDS Our innovation pipeline aligns well with shifting consumer trends. In coffee, we recently introduced 1850 as a new premium coffee brand that will be the basis for a range of 1850 products. Inspired by the 170-year heritage of the Folgers brand which originated in San Francisco during the Gold Rush, 1850 tells an authentic story that resonates with premium coffee consumers of all ages. Pet food and snacks has now become the largest centerof-store category in the U.S. food and beverage market, generating $32 billion in annual retail sales across all channels. The fiscal year 2019 acquisition of Ainsworth Pet Nutrition reinforces our commitment to the category and will build on our already strong position following the acquisition of Big Heart Pet Brands three years ago. In particular, Rachael Ray Nutrish is a high-growth premium brand that has been integral in driving the trend toward the premium dog food category in grocery and mass channels. We believe there are distribution expansion opportunities and growth prospects in mass premium cat food and pet snacks. In snacks, we recently introduced a new platform under the Jif brand Jif Power Ups wholesome snacks that meet the desires of both kids and parents. And in pet snacks, Pup-Peroni jerky bites, new varieties of Milk-Bone treats, and Milos Kitchen premium dog treats were introduced with real meat as the number one ingredient to expand our presence in the growing natural meat snacks segment. INVESTING IN CAPABILITIES The relentless pace of digital innovation is fundamentally changing the way consumers shop. In response, we recently completed an organizational restructure with 6 THE J. M. SMUCKER COMPANY 2018 ANNUAL REPORT 7

6 a significant commitment to marketing and digital innovation, especially e-commerce. With more than 2 percent of sales coming from e-commerce today, we have ample opportunity for growth. Our expectation is that e-commerce will account for 5 percent of total net company sales by fiscal year 2020 as digital capabilities enable us to be more agile and responsive to consumer needs. Additional supply chain flexibility and development of channel-exclusive offers are expected to improve our current e-commerce margins. Progress toward this goal is already evident. In fiscal year 2018, our total e-commerce sales increased 71 percent, with pet and coffee e-commerce sales up 64 percent and 154 percent, respectively. We believe both categories are well-suited for a subscription model. In fact, 20 percent of Natural Balance brand sales were generated through the e-commerce channel. As we continue to build e-commerce capabilities, the Company is investing heavily in data analytics to enhance decision-making in key areas such as site-specific search engine optimization, impulse purchasing, and pricing strategies. We anticipate another year of strong e-commerce growth in fiscal year Marketing our brands was another important area of investment this past fiscal year. As an example, our introduction of the Nature s Recipe brand into grocery and mass channels this year represented the largest marketing campaign in Smucker history. Its effectiveness was underscored by a 33 percent increase in sales, even as additional premium offerings entered the channel. Notably, incremental marketing investments are planned in fiscal year 2019 for 1850, Jif, and Smucker s Uncrustables. We also continue to invest in manufacturing capacity where we see potential for significant volume growth. Construction of our new Smucker s Uncrustables manufacturing facility in Longmont, Colorado, is on track for completion in calendar year Net sales for Smucker s Uncrustables surpassed $250 million in fiscal year 2018, and we expect the business to reach $500 million in annual net sales over the next five years. A key component of that effort is a new K-Cup agreement with Keurig Green Mountain. New contract terms provide improved economics, increased distribution, and additional SKUs, which should result in margins consistent with our other coffee business. Our U.S. K-Cup business net sales grew 11 percent in fiscal year 2018, aided in part by this new agreement. Additionally, our recently introduced Right Spend zero-based budgeting initiative strengthens cost discipline throughout the organization and will save as much as $50 million over the next two years. We also are realizing substantial annual earnings benefit from tax reform. LOOKING AHEAD We are pleased with execution to date against our strategic roadmap and our organization s clear focus on both shortand long-term priorities. We are confident this approach will drive strong, long-term returns for all our stakeholders. Even in a challenging and evolving environment, we are well-positioned for success in great categories. We have a strong mix of leading, iconic brands and emerging, on-trend brands that allows us to meet the diverse needs of our consumers. We would like to thank our more than 7,000 employees for their efforts this past year and for their ongoing commitment to Smucker. It is their diligence and commitment that enable us to offer brands that consumers love and trust. We are confident we have the right team in place across our businesses to deliver long-term growth and shareholder value. And we thank you, our shareholders, for your continued support and confidence in our Company. Tim Smucker Richard Smucker Mark Smucker June 18, 2018 OUR PURPOSE Helping to bring families together to share memorable meals and moments. We have always defined success by more than financial performance. We believe how we do things is as important as what we do. Our Purpose aims to articulate why we are in business and the impact we aspire to have on society. Being together with the ones we love isn t just a pleasant way to spend time it s vital to a healthy, happy, fulfilling life. In fact, the more family and friends spend time with each other, the richer their lives become. We believe we can help strengthen families through the memorable meals and moments they share, and we can help make every day a little more special by nurturing the bonds that bring people together, as well as people and their pets closer together. And the stronger families are today, the stronger our society will be tomorrow. Quite simply, life tastes better together. SYNERGY AND COST SAVINGS Executing against our strategic roadmap while maintaining earnings growth relies on cost management to support innovation and investment activities. During fiscal year 2018, we achieved a targeted $140 million in incremental synergies and cost savings. This achievement keeps us on track to meet a goal of $450 million in cost savings by fiscal year THE J. M. SMUCKER COMPANY 2018 ANNUAL REPORT 9

7 LEADING A $10 BILLION MARKET U.S. Retail Coffee Led by our iconic and emerging brands Folgers, Dunkin Donuts, Café Bustelo, and the recently launched 1850 Smucker remains the leader in the U.S. at-home retail coffee category. We offer products across a variety of price points while participating in all key segments of at-home coffee, including mainstream roast and ground, one-cup, premium, instant, and ready-to-drink. 10 THE J. M. SMUCKER COMPANY 2018 ANNUAL REPORT 11

8 U.S. Retail Coffee Segment Performance Iconic Brands and Innovative New Platforms Fuel American Coffee Consumers America s love affair with coffee shows no signs of slowing, and Smucker is innovating and building on our already market-leading coffee portfolio to meet consumer demand. FISCAL YEAR 2018 PERFORMANCE KEY ACHIEVEMENTS PRODUCT INNOVATION 1850 This new premium coffee platform is inspired by the Folgers heritage, resonating with both core consumers and millennials. MARKETING AND PROMOTION Segment Net Sales in billions We are accelerating efforts to shift our portfolio to better align with consumer preferences. Segment Profit in millions Investments in brand building and marketing are positioning our coffee portfolio for the long term. $ $ $ $722.6 $682.4 $ MARKET LEADERSHIP AND OPPORTUNITY Added largest investment in coffee with the recent launch of the innovative 1850 platform, serving as the basis for a range of new 1850 products to drive growth for years to come. Continued to lead the mainstream and instant market segments with a 54 percent share and 27 percent share, respectively. Maintained Dunkin Donuts momentum, reaching $550 million in annual net sales and growing 10 percent in U.S. Retail Coffee. Increased sales of Café Bustelo by 9 percent, thanks to an ever-increasing consumer base drawn to its authentic heritage and Latin roots. Expanded K-Cup distribution under terms of new agreement with Keurig Green Mountain, resulting in sales increases across all K-Cup brands. Smucker leads the U.S. Retail Coffee Market with a 26 percent dollar share through a commanding position in the mainstream and instant segments. Looking ahead, we have a strong opportunity to pursue an even larger share of the increasingly popular one-cup and premium segments, which account for two-thirds of category sales. Smucker Coffee Market Share Dunkin Donuts Canister Offering an easy-touse, larger size for loyal consumers. Café Bustelo 100% Colombian K-Cup Pods Convenient K-Cup offering meets the demand of consumers seeking medium-roast 100% Colombian coffee in less than one minute. A full media campaign is telling the story of 1850, highlighting 170 years of rich Folgers heritage dating back to its origins in San Francisco during the California Gold Rush. E-COMMERCE 54% Mainstream 27% Instant 15% One-cup 15% Premium Folgers Simply Gourmet Total At-Home Coffee Category 42% ONE-CUP 25% MAINSTREAM 24% PREMIUM 9% INSTANT New premium offering for value-conscious consumers includes a variety of flavors vanilla, cinnamon, chocolate, caramel, and raspberry. Our online coffee sales increased 154 percent in fiscal year 2018, and the category has strong potential for a subscription sales model. 12 THE J. M. SMUCKER COMPANY 2018 ANNUAL REPORT 13

9 MEETING THE SNACKING AND MEALTIME NEEDS OF TODAY S CONSUMERS U.S. Retail Consumer Foods Whether it s a mealtime get-together around the table or grabbing a quick snack on the way to practice, our iconic brands Jif and Smucker s coupled with emerging, on-trend brands like Santa Cruz Organic, Sahale Snacks, Numi, and truroots are providing convenient, on-the-go, low-prep, tastier, and nutritious options that meet the unique needs of today s consumers. Smucker participates in multiple center-of-store categories with respected brands of fruit spreads, nut butters, shortening and oils, natural and organic beverages, organic grains, and fruit and snack mixes. 14 THE J. M. SMUCKER COMPANY 2018 ANNUAL REPORT 15

10 U.S. Retail Consumer Foods Segment Performance Aligning Trusted and Emerging Brands With Consumer Trends Through a combination of iconic brands loved by consumers and emerging, on-trend brands particularly in low-prep, convenient snacking Smucker is driving balanced growth in our Consumer Foods segment. FISCAL YEAR 2018 PERFORMANCE Segment Net Sales in billions Growth in peanut butter and handheld snacks helped offset decreased sales in baking and oils. Segment Profit in millions Increased profitability reflects solid brand management and improved operations. #1 MARKET SHARE IN FRUIT SPREADS $ $ $ $467.5 $458.2 $ MARKET SHARE IN PEANUT BUTTER 91% Consumers snack multiple times throughout the day, half of all eating occasions. 1 1 Hartman Group s Future of Snacking 2016 report. MARKET LEADERSHIP Iconic Brands Driving Long-term Growth #1 #1 KEY ACHIEVEMENTS Through our Jif and Smucker s brands, we continued to lead in the peanut butter and spreads categories, where peanut butter and jelly remains the #1 sandwich among kids. Recently launched Jif Power Ups platform, serving as the basis for a number of new products in the years to come. Invested heavily in snacking in anticipation of doubling our $330 million snacking portfolio over the next five years. Grew Smucker s Uncrustables net sales by 15 percent in fiscal year Exceeded $350 million in net sales in our natural and organic portfolio, thanks in large part to the success of natural peanut butter, organic peanut butter, natural fruit spreads, and natural juices. MARKET SHARE IN ORGANIC PEANUT BUTTER OPPORTUNITY FOR GROWTH Focused on Snacking #1 MARKET SHARE IN NATURAL SHELF-STABLE JUICE $27 BILLION Annual Sales Snacks still reign supreme among Americans, creating a perfect opportunity for our Sahale Snacks brand. PRODUCT INNOVATION Jif Poppers Peanut butter-coated popcorn has been created with the millennial snacker in mind. New Varieties of Sahale Snacks Greater variety for this on-trend brand, including new flavors Banana Rum and Tangerine Vanilla, provides more options for consumers craving a convenient, healthy snack. Jif Power Ups Smucker s new snacking platform, including bars and creamy clusters, provides a wholesome and delicious snack to meet the needs of both parents and children. Jif Power Ups come in a variety of flavors including Chocolate Flavored with Peanut Butter Bars and Strawberry Creamy Clusters. R.W. Knudsen Family Organic Beet Juice Our newest flavor of organic juice for the consumer who values organic and non- GMO verified products. MARKETING AND PROMOTION An integrated national multimedia campaign for Jif Power Ups snacks showcases the healthy ingredients that parents demand, while satisfying kids desire for great taste. SNACKING INVESTMENT Construction of a new Smucker s Uncrustables manufacturing facility in Longmont, Colorado, is on track for completion by calendar year The $340 million investment is expected to add as many as 500 jobs to the surrounding communities. 16 THE J. M. SMUCKER COMPANY 2018 ANNUAL REPORT 17

11 FULFILLING THE NEEDS OF PETS AND THOSE WHO LOVE THEM U.S. Retail Pet Foods In the $32 billion pet foods and snacks category, we are making significant investments to meet consumer demand for snacks and premium products made with simple ingredients. In fiscal year 2019, Smucker acquired Ainsworth Pet Nutrition, the maker of Rachael Ray Nutrish and DAD S brands, enhancing our position in the pet category alongside an already strong portfolio that includes Meow Mix, Milk-Bone, Natural Balance, Nature s Recipe, and Kibbles n Bits. 18 THE J. M. SMUCKER COMPANY 2018 ANNUAL REPORT 19

12 U.S. Retail Pet Foods Segment Performance Reinforcing Our Commitment to the Pet Category Three years ago, we entered the growing pet food and snacks category with the acquisition of Big Heart Pet Brands, and we further demonstrated our commitment to this category with our recent acquisition of Ainsworth Pet Nutrition. FISCAL YEAR 2018 PERFORMANCE KEY ACHIEVEMENTS PRODUCT INNOVATION Rachael Ray Nutrish Tasty Real Meat Treats The newest addition to the Smucker portfolio has introduced its natural meat dog snacks, serving as a favorite among dog owners. MARKETING AND PROMOTION Segment Net Sales in billions Investments in Nature s Recipe, Rachael Ray Nutrish and dog snack innovation will drive topline growth. Segment Profit in millions Topline growth in key segments, combined with the scale and efficiencies from the Ainsworth acquisition, should lead to segment profit growth. $2.3 $2.1 $ $493.9 $481.0 $ Maintained the #1 market share position in dog snacks, the #2 position in dry cat food, and a strong presence in premium pet food. Completed acquisition of Ainsworth Pet Nutrition in fiscal year 2019 and began integration. Increased presence in the premium pet segment through Rachael Ray Nutrish, complementing the success of Nature s Recipe with the Rachael Ray Nutrish s wholesome, natural positioning and authentic recipe-focused formulations. Strengthened dog food position in the mass channel, which drove an 8 percent increase for our dog food brands in fiscal year 2018 sales, driven by 33 percent growth for Nature s Recipe. Milk-Bone Grain Free Snacks An iconic brand meets consumers desire for more variety in pet snacking options. Milo s Kitchen Real Meat Snacks Dog treats that provide real meat for a snack option. The Nature s Recipe s Fuel the Wag campaign joined select Residence Inn by Marriott locations across the country to offer a VI-Pup premium experience in 2018, complete with welcome bags of dog food and travel essentials at check-in, along with local pet-friendly activities. Super Premium Natural Balance A PORTFOLIO MEETING DIVERSE PET PARENT NEEDS Premium Nature s Recipe Rachael Ray Nutrish Mainstream Meow Mix Kibbles n Bits Value Gravy Train 9Lives DAD S Snacks Milk-Bone Rachael Ray Nutrish Pup-Peroni Canine Carry Outs Milo s Kitchen Meow Mix Single-serve, wet cat food provides a convenient option for cat lovers. E-COMMERCE OPPORTUNITY FOR GROWTH Category Overview $32 BILLION U.S. market 60%+ American households are pet families #1 U.S. center-of-store category 2% CAGR over the past 5 years U.S. RETAIL PET FOODS SEGMENT 33% PET SNACKS 30% MAINSTREAM CAT FOOD 23% MAINSTREAM DOG FOOD 14% PREMIUM PET FOOD Natural Balance L.I.D. Products A high-protein, highquality offering in the super premium pet food segment. Sales increased 64 percent during fiscal year 2018, underscoring the potential of subscription sales for pet food. 20 THE J. M. SMUCKER COMPANY 2018 ANNUAL REPORT 21

13 LEVERAGING BRANDS IN ADJACENT MARKETS International and Away From Home International and Away From Home businesses include domestic sales outside U.S. retail channels and foreign sales, primarily in Canada, Mexico, and the Caribbean. We are also a preferred supplier of food and beverages to North American foodservice operators, including casual and fine dining establishments, schools and universities, hospitals, and business and industry customers. 22 THE J. M. SMUCKER COMPANY 2018 ANNUAL REPORT 23

14 International and Away From Home Segment Performance PRODUCT INNOVATION MARKETING AND PROMOTION Iconic Brands Drive Momentum in International and Away From Home Market Away From Home saw a 3 percent increase in net sales, driven largely by the Smucker s brand and Smucker s Uncrustables. Sales also benefited from the launch of Jif back into the Canadian market. FISCAL YEAR 2018 PERFORMANCE KEY ACHIEVEMENTS Robin Hood Just Enough Cookies A smaller batch of this delicious treat for valueconscious consumers. Segment Net Sales in billions Sales increased from $1,062 million to $1,094 million in fiscal year Segment Profit in millions Increased profitability reflected continued efforts to refine our focus on key growth categories. $ $ $ $ $185.1 $ Increased sales $32.4 million, driven in large part by significant growth in Away From Home and International. Outperformed year-one sales targets for the launch of the Jif brand in the Canadian market to meet consumer demand. Experienced double-digit growth of the Smucker s Uncrustables brand as an Away From Home snack that consumers of all ages can enjoy. MARKET LEADERSHIP Smucker Foods of Canada holds #1 share positions across 6 categories, including flour, pickles and relish, fruit spreads, canned milk, shortening, and ice cream toppings. These brands represent approximately 50% of net sales in Canada. OPPORTUNITY FOR GROWTH Segment growth opportunities continue through a strategic focus on broadening products offered in the markets we serve across our three key growth categories: coffee, pet, and snacking. Jif Crunchy Peanut butter with a crunchy texture and fresh-roasted peanut taste. Folgers K-Cup A one-cup serving option from this iconic brand. Smucker s Natural Jam New to our Away From Home portion-control offerings are Smucker s Natural Jam packets delivering on brand quality in a convenient on-the-go package. The Jif brand recently launched into the Canadian marketplace with premium positioning and robust marketing and trade support. The brand quickly rose to the #2 share position and will be a growth platform for our Canadian business moving forward. Robin Hood s The Magic s in the Making television advertisement aired during episodes of The Great Canadian Baking Show, with Smucker baking products also integrated into the broadcast and digital elements of the popular CBC reality series. E-COMMERCE Coffee machine innovations should drive future growth in liquid coffee. The1850 brand also will be introduced in the Away From Home market to meet demand for more premium offerings. With big plans on the horizon for innovations in pet snacks, confidence in the growth potential of pet foods is strong. The addition of new customers and increased sales from current customers, especially in portioncontrol products, is driving growth. Snacking continues to be a major trend, with Smucker s Uncrustables and Sahale Snacks both gaining popularity in the Away From Home market. Excellence Compact Excellence Compact delivers a variety of specialty coffee beverages by way of our proprietary Select Brew liquid coffee system and enables us to enter channels and locations such as offices and restaurants through its sleek and modern design. We are building capabilities in this dynamic and fast-growing sales channel in the Canadian market. 24 THE J. M. SMUCKER COMPANY 2018 ANNUAL REPORT 25

15 Sustainability at Smucker CREATING A BETTER TOMORROW BY FOCUSING ON Preserving our culture; Ensuring our long-term Economic viability; Driving positive Environmental impact; and Being Socially responsible. Sustainability is a core component of our corporate strategy at Smucker. We are proud to advance our business goals without sacrificing our respect for the environment and support for the communities we serve. Over the past year, we have made progress in areas such as responsible sourcing, sustainable agriculture, environmental responsibility, and community impact. Here are some of our achievements: 10% Total retail coffee purchased from certified sources 5% Reduction in water use intensity against 2014 baseline 16,000+ Smallholder farmer beneficiaries through work with the Better Coffee Harvest Project and Hanns R. Neumann Foundation 7% Reduction in greenhouse gas emissions intensity against 2014 baseline 100% Direct palm oil purchases from responsible and certified sustainable sources 675 Hectares of quinoa-growing land certified to NOP-USDA production and organic standards 9 LEED -certified facilities 4 MILLION Pounds of Smucker product donated to food banks across the country in fiscal year % Total waste diverted from landfills 17.3 MILLION Dog and cat meals donated to Rescue Bank in fiscal year 2018 Please view our 2018 Corporate Responsibility Report at corporateresponsibility.jmsmucker.com. 26 THE J. M. SMUCKER COMPANY

16 2018 FINANCIAL REVIEW FIVE-YEAR SUMMARY OF SELECTED FINANCIAL DATA The following table presents selected financial data for each of the five years in the period ended April 30, The selected financial data should be read in conjunction with the Results of Operations and Liquidity and Capital Resources sections of Management s Discussion and Analysis and the consolidated financial statements and notes thereto. Year Ended April 30, (Dollars and shares in millions, except per share data) Statements of Income: Net sales $ 7,357.1 $ 7,392.3 $ 7,811.2 $ 5,692.7 $5,610.6 Gross profit $ 2,836.1 $ 2,835.3 $ 2,967.8 $ 1,968.7 $2,031.0 % of net sales 38.5% 38.4% 38.0% 34.6% 36.2% Operating income $ 1,036.1 $ 1,031.5 $ 1,145.3 $ $ % of net sales 14.1% 14.0% 14.7% 13.6% 16.4% Net income $ 1,338.6 $ $ $ $ Financial Position: Cash and cash equivalents $ $ $ $ $ Total assets 15, , , , ,041.4 Total debt 4, , , , ,216.3 Total shareholders equity 7, , , , ,029.6 Liquidity: Net cash provided by operating activities $ 1,218.0 $ 1,059.0 $ 1,461.0 $ $ Additions to property, plant, and equipment Free cash flow (A) , Quarterly dividends paid Purchase of treasury shares EBITDA (as adjusted) (A) 1, , , ,185.5 Share Data: Weighted-average shares outstanding Weighted-average shares outstanding assuming dilution Dividends declared per common share $ 3.12 $ 3.00 $ 2.68 $ 2.56 $ 2.32 Earnings per Common Share: Net income $ $ 5.11 $ 5.77 $ 3.33 $ 5.42 Net income assuming dilution Other Non-GAAP Measures: (A) Adjusted gross profit $ 2,802.7 $ 2,868.2 $ 2,968.0 $ 1,999.4 $2,035.1 % of net sales 38.1% 38.8% 38.0% 35.1% 36.3% Adjusted operating income $ 1,431.8 $ 1,481.8 $ 1,489.8 $ $1,047.6 % of net sales 19.5% 20.0% 19.1% 17.0% 18.7% Adjusted income and earnings per share: Adjusted income $ $ $ $ $ Adjusted earnings per share assuming dilution $ 7.96 $ 7.72 $ 7.79 $ 4.59 $ 6.24 (A) We use non-gaap financial measures to evaluate our performance. Refer to Non-GAAP Financial Measures in the Management s Discussion and Analysis section for a reconciliation to the comparable GAAP financial measure ANNUAL REPORT 27

17 SUMMARY OF QUARTERLY RESULTS OF OPERATIONS The following is a summary of unaudited quarterly results of operations for the years ended April 30, 2018 and (Dollars in millions, except per share data) Quarter Ended Net Sales Gross Profit Net Income Net Income per Common Share Net Income per Common Share Assuming Dilution 2018 July 31, 2017 $1,748.9 $662.1 $126.8 $1.12 $1.12 October 31, , January 31, , April 30, , July 31, 2016 $1,815.8 $722.7 $170.0 $1.46 $1.46 October 31, , January 31, , April 30, , Annual net income per common share may not equal the sum of the individual quarters due to differences in the average number of shares outstanding during the respective periods, primarily due to share repurchases. STOCK PRICE DATA Our common shares are listed on the New York Stock Exchange ticker symbol SJM. The table below presents the high and low market prices for the shares and the quarterly dividends declared. There were approximately 319,849 shareholders of record as of June 12, 2018, of which approximately 39,362 were registered holders of common shares. Quarter Ended High Low Dividends 2018 July 31, 2017 $ $ $0.78 October 31, January 31, April 30, July 31, 2016 $ $ $0.75 October 31, January 31, April 30, THE J. M. SMUCKER COMPANY

18 COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL SHAREHOLDER RETURN April 30, $ $ $ $ $ $ S&P Packaged Foods & Meats S&P The above graph compares the cumulative total shareholder return for the five years ended April 30, 2018, for our common shares, the S&P Packaged Foods & Meats Index, and the S&P 500 Index. These figures assume all dividends are reinvested when received and are based on $100 invested in our common shares and the referenced index funds on April 30, Copyright 2018 Standard & Poor s, a division of S&P Global. All rights reserved ANNUAL REPORT 29

19 MANAGEMENT S DISCUSSION AND ANALYSIS (Dollars and shares in millions, unless otherwise noted, except per share data) COMPANY BACKGROUND For more than 120 years, ( Company, we, us, or our ) headquartered in Orrville, Ohio, has brought families together to share memorable meals and moments. Guided by a vision to engage, delight, and inspire consumers through trusted food and beverage brands that bring joy throughout their lives, the Company has grown to be a wellrespected North American marketer and manufacturer with a balanced portfolio of leading and emerging, on-trend brands. In consumer foods and beverages, our brands include Smucker s, Folgers, Jif, Dunkin Donuts, Crisco, Café Bustelo, R.W. Knudsen Family, Sahale Snacks, Smucker s Uncrustables, Robin Hood, and Bick s. In pet food and pet snacks, our brands include Rachael Ray Nutrish, Meow Mix, Milk-Bone, Kibbles n Bits, Natural Balance, and Nature s Recipe. We have four reportable segments: U.S. Retail Coffee, U.S. Retail Consumer Foods, U.S. Retail Pet Foods, and International and Away From Home. The U.S. retail market segments in total comprised approximately 85 percent of net sales in 2018 and represent a major portion of our strategic focus the sale of branded food and beverage products with leadership positions to consumers through retail outlets in North America. In the U.S. retail market segments, our products are sold primarily to food retailers, food wholesalers, club stores, pet specialty stores, discount and dollar stores, drug stores, military commissaries, mass merchandisers, natural foods stores and distributors, and online retailers. The products included in the International and Away From Home segment are distributed domestically and in foreign countries through retail channels and foodservice distributors and operators (e.g., restaurants, lodging, schools and universities, health care operators). STRATEGIC OVERVIEW We remain rooted in our Basic Beliefs of Quality, People, Ethics, Growth, and Independence established by our founder and namesake, Jerome Smucker, more than a century ago. Today, these Basic Beliefs are the core of our unique corporate culture and serve as a foundation for decision-making and actions. We have been led by five generations of family leadership, having had only six chief executive officers in 121 years. This continuity of management and thought extends to the broader leadership team that embodies the values and embraces the business practices that have contributed to our consistent growth. Our strategic vision is to own and market a portfolio of food and beverage brands that combines number one and leading brands with emerging, on-trend brands to drive balanced, long-term growth, primarily in North America. Our strategic long-term growth objectives are to increase net sales by 3 percent and earnings per share, measured on a non-gaap basis, by 8 percent annually on average. We expect organic growth, including new products, to drive much of our top-line growth, while the contribution from acquisitions will vary from year to year. Net sales has increased at a compound annual growth rate of 5 percent over the past five years, driven by the acquisition of Big Heart Pet Brands ( Big Heart ) in 2015, while income per diluted share excluding non-gaap adjustments ( adjusted earnings per share ) has increased at a rate of 6 percent over the same period. Our non-gaap adjustments include amortization expense and impairment charges related to intangible assets, integration and restructuring costs, unallocated gains and losses on commodity and foreign currency exchange derivatives, and, beginning in 2018, certain one-time tax adjustments. Refer to Non-GAAP Financial Measures in this discussion and analysis for further information. During the fourth quarter of 2018, we announced a definitive agreement to acquire the stock of Ainsworth Pet Nutrition, LLC ( Ainsworth ). On May 14, 2018, we completed the all-cash transaction, which was funded by debt and valued at $1.9 billion. Ainsworth is a leading producer, distributor, and marketer of premium pet food and pet snacks, predominantly within the U.S. Approximately two-thirds of Ainsworth s sales are generated by its Rachael Ray Nutrish brand, which is driving significant growth in the premium pet food category. We anticipate the acquired business to contribute net sales of approximately $800.0 in Annual cost synergies of approximately $55.0 are expected to be fully realized within three years after the closing, with approximately $25.0 anticipated in Net cash provided by operating activities has increased at a compound annual growth rate of 7 percent over the past five years. Our cash deployment strategy is to balance reinvesting in our business through acquisitions and capital expenditures with returning cash to our shareholders through the payment of dividends and share repurchases. Our strategy also includes a significant focus on debt repayment as a result of the additional debt we incurred to finance the Ainsworth acquisition subsequent to year-end. RESULTS OF OPERATIONS All comparisons presented in this discussion and analysis are to the corresponding period of the prior year, unless otherwise noted. On December 31, 2015, we sold our U.S. canned milk brands and operations to Eagle Family Foods Group LLC, a subsidiary of funds affiliated with Kelso & Company. The transaction included canned milk products that were primarily sold in U.S. retail and foodservice channels with annual net sales of approximately $ The operating results for this business were primarily included in the U.S. Retail Consumer Foods segment prior to the sale. We received proceeds from the divestiture of $193.7, which were net of transaction costs and a working capital adjustment, and recognized a pre-tax gain of $ THE J. M. SMUCKER COMPANY

20 MANAGEMENT S DISCUSSION AND ANALYSIS Year Ended April 30, % Increase (Decrease) 2017 % Increase (Decrease) Net sales $7,357.1 $7,392.3 $7,811.2 % (5)% Gross profit $2,836.1 $2,835.3 $2,967.8 (4) % of net sales 38.5% 38.4% 38.0% Operating income $1,036.1 $1,031.5 $1,145.3 (10) % of net sales 14.1% 14.0% 14.7% Net income: Net income $1,338.6 $ $ (14) Net income per common share assuming dilution $ $ 5.10 $ (11) Adjusted gross profit (A) $2,802.7 $2,868.2 $2,968.0 (2) (3) % of net sales 38.1% 38.8% 38.0% Adjusted operating income (A) $1,431.8 $1,481.8 $1,489.8 (3) (1) % of net sales 19.5% 20.0% 19.1% Adjusted income: (A) Income $ $ $ (4) Earnings per share assuming dilution $ 7.96 $ 7.72 $ (1) (A) We use non-gaap financial measures to evaluate our performance. Refer to Non-GAAP Financial Measures in this discussion and analysis for a reconciliation to the comparable GAAP financial measure. Summary of 2018 Net sales were flat in 2018, reflecting declines within the U.S. Retail Consumer Foods and U.S. Retail Coffee segments, offset by gains in the U.S. Retail Pet Food and International and Away From Home segments. The overall net sales change was driven by unfavorable volume/mix, which was mostly offset by the impacts of higher net price realization and favorable foreign currency exchange in the current year. Operating income was flat, as lower special project costs and selling, distribution, and administrative ( SD&A ) expenses were mostly offset by a $43.7 increase in noncash impairment charges related to intangible assets. Net income per diluted share increased $6.68, reflecting a provisional nonrecurring income tax benefit of $765.8 related to U.S. tax reform legislation, which was enacted during the third quarter of 2018, and a decrease in weighted-average common shares outstanding as a result of our share repurchase activities during the fourth quarter of Operating income excluding non-gaap adjustments ( adjusted operating income ) decreased 3 percent in Adjusted earnings per share increased 3 percent, with the primary differences from the change in GAAP results being the exclusion of the impacts of our one-time tax adjustments, a favorable change in the impact of unallocated derivative gains and losses as compared to the prior year, and lower special project costs. The impairment charges in 2018 and 2017 were also excluded from our non-gaap results. Summary of 2017 Net sales decreased 5 percent in 2017, driven by the noncomparable impact from the U.S. canned milk business, which was divested during the third quarter of 2016, as well as lower net price realization and unfavorable volume/mix in Operating income decreased 10 percent, primarily due to the impact of noncash impairment charges of $133.2 recognized during 2017 and the net sales decline. Additionally, 2016 results benefited from the recognition of a $25.3 pre-tax gain on the divestiture of the U.S. canned milk business and the related profits prior to the divestiture. SD&A expenses and Big Heart integration costs were lower in 2017 as compared to Net income per diluted share decreased 11 percent in 2017 and reflects the benefit of a decrease in weighted-average common shares outstanding as a result of our share repurchase activities during the fourth quarters of 2017 and However, this benefit was more than offset by the impact of an increase in the effective tax rate in 2017 as compared to the prior year. Adjusted operating income and adjusted earnings per share both decreased 1 percent in 2017 and excluded the impact of the impairment charges and the reduction in integration costs. Net Sales 2018 Compared to 2017 Net sales were flat in 2018, reflecting a 1 percentage point impact from unfavorable volume/mix, which was offset by the impact of higher net pricing and favorable foreign currency exchange. The unfavorable volume/mix was driven by declines in the oils and baking categories, which were partially offset by gains in pet food. Net price realization contributed 1 percentage point to net sales, as higher net pricing for peanut butter, the Smucker s brand, and oils was partially offset by lower net pricing for pet food and pet snacks ANNUAL REPORT 31

21 MANAGEMENT S DISCUSSION AND ANALYSIS 2017 Compared to 2016 Year Ended April 30, Increase (Decrease) % Net sales $7,392.3 $7,811.2 $(418.9) (5)% Divestiture (153.5) Foreign currency exchange Net sales excluding divestiture and foreign currency exchange (A) $7,396.1 $7,657.7 $(261.6) (3)% Amounts may not add due to rounding. (A) Net sales excluding divestiture and foreign currency exchange is a non- GAAP measure used to evaluate performance internally. This measure provides useful information to investors because it enables comparison of results on a year-over-year basis. Net sales excluding divestiture and foreign currency exchange in the table above excludes the impact of the U.S. canned milk business, which was divested on December 31, 2015, and foreign currency exchange. Net sales decreased $418.9, or 5 percent, in 2017, partially due to the impact of the divested U.S. canned milk business. Excluding the non-comparable divested business and foreign currency exchange, net sales decreased 3 percent, driven by the U.S. Retail Coffee segment, specifically the Folgers brand, and the U.S. Retail Pet Foods segment. The decline reflected lower net price realization and unfavorable volume/mix, which contributed somewhat equally to lower net sales. Operating Income The following table presents the components of operating income as a percentage of net sales. Year Ended April 30, Gross profit 38.5% 38.4% 38.0% Selling, distribution, and administrative expenses: Marketing 3.2% 3.4% 3.5% Advertising Selling Distribution General and administrative Total selling, distribution, and administrative expenses 18.6% 18.8% 19.3% Amortization Goodwill impairment charge 2.0 Other intangible assets impairment charges Other special project costs Other operating expense (income) net (0.1) (0.4) Operating income 14.1% 14.0% 14.7% Amounts may not add due to rounding Compared to 2017 Gross profit was flat in 2018, as the impact of unfavorable volume/ mix was offset by the favorable impact of higher pricing and slightly lower costs. Gross profit excluding non-gaap adjustments ( adjusted gross profit ) decreased $65.5, or 2 percent, with the primary difference from the change in GAAP results being the exclusion of a $64.5 favorable change in the impact of unallocated derivative gains and losses as compared to the prior year. SD&A expenses decreased $19.9, or 1 percent, primarily due to the benefits from our cost savings initiatives and lower selling expense, which more than offset an increase in advertising expense, driven by the U.S. Retail Pet Foods segment. Special project costs decreased $33.3, primarily due to a reduction in Big Heart integration costs. Operating income was flat, reflecting a $43.7 increase in noncash impairment charges, driven by the U.S. Retail Pet Foods segment. Adjusted operating income decreased $50.0, or 3 percent. The primary differences from the change in GAAP results were the exclusion of the favorable change in the impact of unallocated derivative gains and losses as compared to the prior year and the impacts of impairment charges and special project costs Compared to 2016 Gross profit decreased $132.5, or 4 percent, in 2017, primarily reflecting unfavorable volume/mix and the loss of U.S. canned milk profits. The impact of lower net price realization was offset by a reduction in commodity and manufacturing overhead costs and incremental synergy realization related to the Big Heart acquisition. Adjusted gross profit decreased $99.8, or 3 percent, and excluded a $39.2 unfavorable change in the impact of unallocated derivative gains and losses as compared to SD&A expenses decreased $119.6, or 8 percent, primarily driven by incremental synergy realization. Additionally, Big Heart integration costs decreased by $81.1, or 56 percent. Operating income decreased $113.8, or 10 percent, reflecting noncash impairment charges of $133.2 related to certain indefinitelived trademarks, primarily within the U.S. Retail Pet Foods segment. Additionally, 2016 results benefited from the recognition of the $25.3 gain related to the divestiture of the U.S. canned milk business. Adjusted operating income decreased $8.0, or 1 percent, with the primary differences from GAAP results being the exclusion of the impairment charges, integration costs, and the unfavorable change in the impact of unallocated derivative gains and losses as compared to Interest Expense and Other Income 2018 Compared to 2017 Net interest expense increased $11.0 in 2018, primarily due to financing fees we incurred in 2018 in connection with the Ainsworth acquisition. For additional information, see Note 8: Debt and Financing Arrangements. 32 THE J. M. SMUCKER COMPANY